Why are milk prices so high? A K-State dairy researcher will chat about the issue

July 31, 2007

This chat has already taken place. Read the transcript below.

You can't miss the increasing price of milk these days. Mike Brouk, Kansas State University dairy researcher with the Animal Sciences and Industry Department, will answer readers' questions about the milk industry and pricing factors.

Moderator:

Good morning. This is Dennis Anderson, managing editor of the Lawrence Journal-World. Our guest today is Mike Brouk, dairy researcher with the Animal Sciences and Industry Department at Kansas State University. We will discuss factors related to milk industry and pricing factors. Welcome Mike.

Mike Brouk:

Thanks for inviting me to join this chat today.

Moderator:

Can you briefly explain what factors go into determining the price of milk?

Mike Brouk:

There are many factors that impact the price of milk in the store. First, there is the price of milk paid to dairy producers for the raw milk. This price is determined from the whole sale price of certain dairy products. These prices are obtained by the NASS (National Agricuture Stat. Service) each week and utilized on a monthly basis by the milk market administrator to set the minimum price to be paid to dairy producers. Second there is the cost of processing and transportation of the product from the farm to the store. Third there is the cost of marketing the product.

How is ethanol and the demand for corn affecting the price of dairy products?

Mike Brouk:

The price of feed does not directly impact the price of milk paid to dairy producers. Milk price paid to producers is determined by the value of dairy products on the wholesale market. Supply of milk and consumption of dairy products are what impacts the price of dairy products. The only impact higher feed cost has on milk price is when feed cost causes producers to change feeding programs which impacts the supply of milk. The current situation with feed and milk prices should not cause producers to reduce feed cost resulting in lower milk prodution.

Moderator:

In recent years what has been the trend in the market's demand for milk?

Mike Brouk:

In general, the trend has been for increased demand for milk and dairy products. As a result, milk production continues to rise to meet the demand.

Just so you know, we have stopped buying milk in this household, even with growing children. Instead I give my children calcium supplements. The actions taken on milk are because of the hormones given to the cows (And I KNOW they are cows, having grown-up on a W. Kansas farm) and because of THIS report:

First, the administration does not set the price of milk. Again, the price of milk paid to producers is directly related to the price of wholesale products marketed under a free market situation. The price support program is currently not being utilized due to the fact that the farm milk price is above the minimum level at which the program operates. The current program only paid producers when the milk price is low. As for hormones used in dairy product, all that are utilized have been approved by FDA. For those that want milk from cows not treated with hormones, those options are available in most stores. I want to stress that FDA has issued numerous reports that indicate that milk from cows treated with hormones approved for use in lactating dairy cattle is not different from milk from cows not treated with hormones.

Moderator:

A reader asks if there is a link between dairy products and increasing rates of cancer. Have you seen this in your research?

Mike Brouk:

This is not in my area of research. However, I'm not aware of any reports that showing a link between dairy products and cancer.

Moderator:

What do you anticipate to happen to milk prices in the store in the coming weeks and months?

Mike Brouk:

Since the dairy producers are operating in a free market situation, I expect milk production to increase in the next few months, as producers attempt to take advantage of higher milk prices. I would also expect consumers to react to the higher prices by reducing consumption slightly. If we have an increase in milk supply and an decrease in dairy product demand, this will reduce the wholesale price of dairy products. Thus, I expect milk prices in the store to peak in the next few weeks and then begin to drop over the next several months. The supply of milk and dairy product demand curves are nearly equal, so a slight change in either will impact wholesale prices of dairy products.

Comments

In response to the comments of the person who hates milk: Yes, you could eliminate marketing the milk if you didn't want to sell it. Then again, if we were all milk haters with only broken toes, then maybe that makes sense. There are also numerous studies showing dairy calcium to reduce the risk of many forms of cancer. Thanks to Mike Brouk for being a voice of reason. Oh, and if it matters, I like milk; I buy milk for my two healthy kids, and none of us have had any broken bones--not even toes.